China's seaborne thermal coal market extended retreats on June 22, as the geopolitical premium underpinning import coal prices in recent months has been unwinding. This, together with growing unsold prompt cargoes and southern China port congestion, weighed on the overall sentiment.

Progress toward easing the standoff around the Strait of Hormuz is working against seaborne coal pricing. "Should the waterway return to normal transit, one of the most significant supports thermal coal prices enjoyed during the past several months would disappear," said a southern China-based trader source.

Traders reckoned this may remove the underlying support that partly had allowed seaborne coal prices to climb initially and then push domestic prices higher. They cautioned that import cargoes would require significant discounts to clear, marking a departure from the 'buy-the-rally' sentiment that dominated the first half.

"Some traders who had bet on a market rebound are now rushing to offload tonnage to avoid demurrage charges, while those who had turned outright bearish look to lock in gains while they still could," said a  southeastern China-based utility source.

With southern port congestion and slow discharges persisting, the source said some traders holding stocks would struggle to move tonnage without conceding further on price.

Indonesian low-CV coal for late June and early July delivery has already corrected sharply, with Panamax 3,800 Kcal/kg NAR coal offers heard falling to $68/t FOB or so. Trader sources described the price level as weak, noting that cargoes booked at these rates were unlikely to be resold profitably given the ample spot availability in South China.

Chinese traders' bidding prices to utility tender for the same grade dropped even faster, with some bids falling to 575-585 yuan/t CFR with VAT South China, netting back to $64-66/t FOB on a Panamax basis, Sxcoal's tracking data showed.

Forward cargo offers also softened in China, traders confirmed, dragged down by the growing bearish sentiment. Bids for late July and early August delivering cargoes were heard at around 600 yuan/t CFR with VAT, translating to roughly $67.5/t FOB.

Offers for forward cargoes from Indonesian miners remained relatively firm due to relatively tight availability for the export market as miners prioritized DMO supply to domestic power plants.

Sxcoal estimated on June 18 that Indonesian 3,800 Kcal/kg NAR coal held a price advantage of 7.9 yuan/t over the domestic comparable, on a CV-adjusted and delivered-to-South China basis, widening by 4.9 yuan/t week on week.

"The price gap between Indonesian coal and domestic equivalents remains insufficient to draw fresh buying interest, and that further declines may be needed before import economics turn attractive again," a Beijing-based trader source said.

Australian 5,500 Kcal/kg NAR coal, by contrast, remained roughly 19.6 yuan/t more expensive than China's domestic counterpart, on a delivered to South China basis, even as that premium narrowed by 8.9 yuan/t over the same period, according to Sxcoal's estimate.

A second South China-based trader source estimated the present landed cost of Australian 5,500 Kcal/kg NAR coal below 900 yuan/t CFR South China with VAT, partly as the freight rate for Panamax vessels from Newcastle to Guangzhou retreating to around $17/t compared to over $20/t in early June.

Chinese utilities still released tenders yet mostly were not active in locking in cargoes. China Huaneng Group was seeking 13 cargoes totaling 854,000 tonnes of seaborne coal, with bidding open from June 18 at 15:00 and closing June 22 at 15:00 Beijing time. Cargoes span 2,800–5,500 Kcal/kg NAR with sulfur content of 0.3-1.6%, for delivery between July and August, with eligible origins spanning Indonesia, Australia, Russia and Malaysia and several lots permitting multiple-origin sourcing.

On June 22, the CCI index for Indonesian 3,800 Kcal/kg NAR coal was at $66.0/t FOB and $77.5/t CFR, falling $0.5/t and $1/t compared with the pre-holiday levels. The index for Australian 5,500 Kcal/kg NAR coal was at $122.5/t CFR, down $1/t.

Domestic coal holds a soft bias

Thermal coal trading across transfer ports in northern China stayed muted post-Dragon Boat Festival holiday, with moderated power plant coal burn and stalled destocking of port stocks dampening sentiment, despite the ongoing constraints in production areas.

Supply remained structurally tight in major mining hubs. Nationwide safety inspections tied to the June Work Safety Month continued to weigh on output, with mines across Shanxi facing phased production curbs or suspensions, and mines that had resumed operation unable to return to full capacity in the near term. Guaranteed-supply increments stayed limited, with capacity controls leaving little room for large-scale output increases in the short run.

Demand, however, showed a near-term softness. Heavy rainfall across southern China during the plum-rain season has boosted hydropower generation, suppressing coal burns at power plants.

Coal consumption at power plants under six major Chinese coastal power groups retreated from a week ago due to rainfall-tempered weather, while their inventories stayed at moderate-to-high levels, leaving purchases on an as-needed basis rather than active restocking.

Blended 5,000 Kcal/kg NAR coal with sulfur below 1% was heard offered at 765-770 yuan/t, FOB northern port with VAT, with sellers reporting "no buyers willing to transact even at that level". The 4,500 Kcal/kg NAR material reportedly changed hands at a discount of 10 yuan/t to large group buyers.

Traders are expecting corrections in prices this week, with both port and end-user inventories elevated and coastal utility consumption held back by rainy weather. They indicated that the timing and depth of any price recovery hinge on consumption trends and how long the current safety campaign continues to restrict supply.

On June 22, the CCI Index for 5,500 Kcal/kg NAR coal stood at 865 yuan/t FOB with VAT, flat for 11 consecutive trading days; the index for 5,000 Kcal/kg NAR coal dipped 1 yuan/t to 773 yuan/t aftering holding flat for 11 sessions, and 4,500 Kcal/kg NAR coal was at 674 yuan/t, down 1 yuan/t from late last week.